U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

(Mark One)

[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: 	SEPTEMBER 30, 2001

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to _________

Commission file number 0-17232

CAPITAL RESERVE CORPORATION

(Exact name of small business issuer

as specified in its charter)

|COLORADO                        |  |  | 84-0888594         
|------------------------------- |  |  | -------------------
|(State or other jurisdiction of |  |  | (IRS Employer      
|incorporation or organization)  |  |  | Identification No.)

1530 - 9th AVENUE S.E.

CALGARY, ALBERTA, CANADA T2G 0T7

(Address of principal executive offices)

(403) 204-0260

(Issuer's telephone number)

1528B - 9th AVENUE S.E.

CALGARY, ALBERTA, CANADA T2G 0T7

(Former name, former address and former fiscal year, if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes _X_ No __

State the number of shares outstanding of each of the issuer's classes of common equity, as of the last practicable date:

6,864,235 shares of common stock, no par value, as of OCTOBER 26, 2001

Transitional Small Business Disclosure Format (check one): Yes___ No _X_

PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions for Form 10-QSB and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. All such adjustments are of a normal recurring nature. Operating results for the three and nine month periods ended September 30, 2001 and 2000 are not necessarily indicative of the results that may be expected for the year ending December 31, 2001. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-KSB for the year ended December 31, 2000.





Unaudited Consolidated Financial Statements

Balance Sheets

Statements of Operations

Statements of Cash Flows

Statements of Stockholders' Equity

Notes to Unaudited Consolidated Financial Statements



CAPITAL RESERVE CORPORATION

AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

|ASSETS                                                                                                                                                                                                                                    | As at September 30, 2001
(unaudited) |             | As at December 31, 2000
(audited)
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------ | ----------- | ---------------------------------
|Current assets                                                                                                                                                                                                                            |                                      |             |                                  
|Cash                                                                                                                                                                                                                                      | $                                    | 22,840      | $                                
|Accounts receivable                                                                                                                                                                                                                       |                                      | 8,129       |                                  
|Loans receivable(Note 2)                                                                                                                                                                                                                  |                                      | 181,441     |                                  
|Prepaid expenses                                                                                                                                                                                                                          |                                      | 210,463     |                                  
|                                                                                                                                                                                                                                          |                                      |             |                                  
|Total Current Assets                                                                                                                                                                                                                      |                                      | 422,873     |                                  
|                                                                                                                                                                                                                                          |                                      |             |                                  
|Investments(Note 3)                                                                                                                                                                                                                       |                                      | 1,165,171   |                                  
|                                                                                                                                                                                                                                          |                                      |             |                                  
|Fixed assets(Note 4)                                                                                                                                                                                                                      |                                      |             |                                  
|Oil and gas leases (net of accumulated depletion of $72,587)(Note 4)                                                                                                                                                                      |                                      | 714,946     |                                  
|Land                                                                                                                                                                                                                                      |                                      | 720,852     |                                  
|Buildings (net of accumulated depreciation of $63,606)(Note 4)                                                                                                                                                                            |                                      | 1,511,118   |                                  
|Office equipment and computers (net of accumulated depreciation of $11,135)(Note 4)                                                                                                                                                       |                                      | 37,326      |                                  
|Total fixed assets                                                                                                                                                                                                                        |                                      | 2,984,242   |                                  
|                                                                                                                                                                                                                                          |                                      |             |                                  
|Total assets                                                                                                                                                                                                                              | $                                    | 4,572,286   | $                                
|                                                                                                                                                                                                                                          |                                      |             |                                  
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                                                                                                                     
|                                                                                                                                                                                                                                          |                                      |             |                                  
|Current liabilities                                                                                                                                                                                                                       |                                      |             |                                  
|Loan payable (Note 5)                                                                                                                                                                                                                     | $                                    | 197,709     | $                                
|Accounts payable                                                                                                                                                                                                                          |                                      | 148,938     |                                  
|Accrued expenses                                                                                                                                                                                                                          |                                      | 17,895      |                                  
|Current portion of long-term debt                                                                                                                                                                                                         |                                      | 149,225     |                                  
|Total current liabilities                                                                                                                                                                                                                 |                                      | 513,767     |                                  
|                                                                                                                                                                                                                                          |                                      |             |                                  
|Long-term liabilities                                                                                                                                                                                                                     |                                      |             |                                  
|Advances payable(Note 6)                                                                                                                                                                                                                  |                                      | 249,936     |                                  
|Future site restoration                                                                                                                                                                                                                   |                                      | 522         |                                  
|Long-term debt(Note 7)                                                                                                                                                                                                                    |                                      | 1,367,398   |                                  
|Total long-term liabilities                                                                                                                                                                                                               |                                      | 1,617,856   |                                  
|                                                                                                                                                                                                                                          |                                      |             |                                  
|Total liabilities                                                                                                                                                                                                                         |                                      | 2,131,623   |                                  
|                                                                                                                                                                                                                                          |                                      |             |                                  
|Commitments and Contingencies(Note 11)                                                                                                                                                                                                    |                                      |             |                                  
|Stockholders' equity                                                                                                                                                                                                                      |                                      |             |                                  
|Class A Common Stock - authorized 100,000,000 shares of no par value and Class C Common Stock - authorized 2,000,000 shares of no par value 6,864,235 Class A
shares issued and outstanding as at September 30, 2001 & December 31, 2000; |                                      | 6,448,020   |                                  
|Accumulated Deficit                                                                                                                                                                                                                       |                                      | (4,007,357) |                                  
|                                                                                                                                                                                                                                          |                                      |             |                                  
|Total stockholders' equity                                                                                                                                                                                                                |                                      | 2,440,663   |                                  
|                                                                                                                                                                                                                                          |                                      |             |                                  
|Total liabilities and stockholders' equity                                                                                                                                                                                                | $                                    | 4,572,286   | $                                
|See notes to financial statements.                                                                                                                                                                                                       

CAPITAL RESERVE CORPORATION

AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

Unaudited

|                                                             |   | For the Three Months Ended September 30, |   | For the Nine Months Ended September 30, |  
|------------------------------------------------------------ | - | ---------------------------------------- | - | --------------------------------------- | -
|                                                             |   |                                          |  
|                                                             |   | 2001                                     |   | 2000                                    |  
|Net sales and gross revenue                                  |   |                                          |   |                                         |  
|Petroleum and natural gas                                    | $ | 28,460                                   | $ | 41,013                                  | $
|Rental properties                                            |   | 60,487                                   |   | 32,629                                  |  
|                                                             |   | 88,947                                   |   | 73,642                                  |  
|Costs and expenses applicable to sales and revenue           |   |                                          |   |                                         |  
|Royalties                                                    |   | 6,326                                    |   | 7,543                                   |  
|Production and operation                                     |   | 7,632                                    |   | 45,031                                  |  
|Depletion, depreciation and amortization                     |   | 26,539                                   |   | 3,068                                   |  
|                                                             |   | 40,497                                   |   | 55,642                                  |  
|Gross profit                                                 |   | 48,450                                   |   | 18,000                                  |  
|                                                             |   |                                          |   |                                         |  
|Expenses                                                     |   |                                          |   |                                         |  
|Legal                                                        |   | 20,625                                   |   | 20,259                                  |  
|Consulting                                                   |   | 88,198                                   |   | 5,000                                   |  
|Directors Fees                                               |   | (15,510)                                 |   | -                                       |  
|Other Administrative expenses                                |   | 22,191                                   |   | 27,420                                  |  
|                                                             |   | 115,504                                  |   | 52,679                                  |  
|                                                             |   |                                          |   |                                         |  
|Earnings (Loss) from operations                              |   | (67,054)                                 |   | (34,679)                                |  
|                                                             |   |                                          |   |                                         |  
|Other income and expenses                                    |   |                                          |   |                                         |  
|Interest income                                              |   | 3,820                                    |   | 24,527                                  |  
|Interest expense                                             |   | (36,147)                                 |   | (6,543)                                 |  
|Gain on exchange of shares                                   |   | 35,893                                   |   | -                                       |  
|Foreign exchange gain/(loss)                                 |   | 59,917                                   |   | 13,005                                  |  
|                                                             |   | 63,483                                   |   | 30,989                                  |  
|Provision for income taxes                                   |   | -                                        |   | -                                       |  
|                                                             |   |                                          |   |                                         |  
|Net Income (Loss)                                            | $ | (3,571)                                  | $ | (3,690)                                 | $
|                                                             |   |                                          |   |                                         |  
|Net Income (Loss) per Common Share                           | $ | (0.00)                                   | $ | (0.00)                                  | $
|                                                             |   |                                          |   |                                         |  
|Weighted Average Number of Common Shares Used in Calculation |   | 6,864,235                                |   | 5,812,274                               |  
|                                                             |   |                                          |   |                                         |  

See notes to financial statements.

CAPITAL RESERVE CORPORATION

AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited

|                                              | For the Nine Months Ended September 30,
|--------------------------------------------- | ---------------------------------------
|2001                                          | 2000                                   
|Cash from operating activities:               |                                        
|Net income (loss) from continuing operations  | $                                      
|Reconciling adjustments                       |                                        
|Depreciation and amortization                 |                                        
|Issuance of shares for services               |                                        
|Acquisition of property                       |                                        
|Exchange rate loss/(gain)                     |                                        
|Changes in operating assets and liabilities   |                                        
|Accounts receivable                           |                                        
|Loans receivable                              |                                        
|Prepaid expenses and deposits                 |                                        
|Loan payable                                  |                                        
|Accounts payable and accrued expenses         |                                        
|Net cash flows from operating activities      |                                        
|                                              |                                        
|Cash from investing activities:               |                                        
|Acquisition of oil and gas properties         |                                        
|Acquisition of property and equipment         |                                        
|Expenditures on property, plant and equipment |                                        
|Investments                                   |                                        
|Proceeds from investor deposits               |                                        
|Net cash flows from investing activities      |                                        
|                                              |                                        
|Cash from financing activities:               |                                        
|Long term debt                                |                                        
|Proceeds from (payments to) advances payable  |                                        
|Sales of common stock                         |                                        
|Offering costs                                |                                        
|Net cash flows from financing activities      |                                        
|Effect of exchange rate changes on cash       |                                        
|Net change in cash and cash equivalents       |                                        
|Cash at beginning of period                   |                                        
|Cash at end of period                         | $                                      



See notes to financial statements.

CAPITAL RESERVE CORPORATION

AND SUBSIDIARY

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

As at nine months ended September 30, 2001

Unaudited



|                                                              | Class A Common Stock |            
|------------------------------------------------------------- | -------------------- | -----------
|                                                              | Shares               | Amount     
|Balance at December 31, 1999                                  | 2,179,865            | $ 3,374,894
|                                                              |                      |            
|Issue of common stock                                         | 2,616,077            | 2,042,463  
|                                                              |                      |            
|Commissions on sales                                          | -                    | (64,800)   
|                                                              |                      |            
|Warrants exercised                                            | 415,730              | 415,730    
|                                                              |                      |            
|Shares for services                                           | 835,513              | 214,163    
|                                                              |                      |            
|Acquisition of property                                       | 817,050              | 408,525    
|                                                              |                      |            
|Net loss for the year                                         | -                    | $ -        
|                                                              |                      |            
|Balance at December 31, 2000                                  | 6,864,235            | $ 6,390,975
|                                                              |                      |            
|Issuance of options for services                              | -                    | 57,045     
|                                                              |                      |            
|Net Income for the nine month period ended September 30, 2001 | -                    | $ -        
|                                                              |                      |            
|Balance at September 30, 2001                                 | 6,864,235            | $ 6,448,020



See notes to financial statements.

CAPITAL RESERVE CORPORATION

Notes to Consolidated Financial Statements

Nine Month Periods ended September 30, 2001 and 2000

Unaudited

Note 1-Summary of Significant Accounting Policies

This summary of significant accounting policies of Capital Reserve Corporation is presented to assist in understanding the Company's financial statements. The financial statements and notes are representations of the Company's management who is responsible for their integrity and objectivity. These accounting policies conform to U.S. generally accepted accounting principles and have been consistently applied in the preparation of the financial statements, which are stated in U.S. Dollars.

Organization

Capital Reserve Corporation (the "Company") was incorporated under the laws of the State of Colorado on August 3, 1982 for the purpose of operating as a financial services holding company.

From 1988 through October 1994, the Company and its subsidiaries solicited various life, accident and health insurance policies in the States of Colorado, New Mexico and Arizona. In October 1994, the Company determined it could no longer maintain capital and surplus requirements for its insurance operations.

From 1995 through June 1996, the Company's primary business was the rental of real property. On July 3, 1996, the Company sold its sole property for net proceeds of $501,276.

In 1997, the Company, through its wholly owned subsidiary Wall Street Investments Corp (WSIC), attempted to start a financial consulting services business. As of April 10, 1999, WSIC was no longer conducting operations and was dissolved in July 2000.

In 1999, the Company's principal place of business moved to Canada. In December 1999, the Company formed a wholly owned subsidiary, Capital Reserve Canada Limited, an Alberta corporation ("Capital Canada"), to locate and acquire producing oil and gas assets in Canada.

As of September 30, 2001, the Company has one (1) wholly owned subsidiary, Capital Reserve Canada Limited.

Operations

Real Property

Residential Property

In connection with a Consulting Agreement agreed to between the Company and its former President, Mr. W. Scott Lawler (see "Consulting Agreement"below), the Company and Mr. Lawler agreed that the Company would purchase a home in the City of Calgary for Mr. Lawler's personal use. The purchase price of the home was $541,241. The Company assumed a variable interest rate mortgage from Alberta Treasury Branches in the amount of $384,554 amortized over 25 years, due and payable on May 1, 2005. On May 1, 2005, the mortgage can either be repaid or renewed with the interest rate converted to the then prevailing fixed rate. The monthly payments of principal and interest, property taxes and all other payments are Mr. Lawler's obligation. Title to such property is in the name of the Company. Mr. Lawler provided funds to the Company in the amount of $167,842 to pay for the down payment and all closing costs associated with the purchase. The funds were provided in the form of a subscription for shares of Capital Reserve's common stock at the purchase price of $1.00 per share. The net proceeds to Capital Reserve realized from the offering was $167,842, as this offering was made without the use of any agent or salesman and was conducted without any costs, commissions or finders' fees.

If and when the property is sold, the Company will receive any and all gains (and/or losses) from such sale, less the cost of any approved improvements to the property paid for by Mr. Lawler. However, Mr. Lawler has the option of acquiring title to the property (and thus all resulting gains or losses) by (a) assuming or paying off the Company's mortgage; and (b) surrendering to the Company the 167,842 shares of common stock obtained from the Company in a private placement. The Company recognized the principal reduction of the mortgage based on the payments of principal made by Mr. Lawler.

Commercial Properties

1. During the fiscal year ended December 31, 2000, the Company purchased a commercial property for a total purchase price of $1,519,000. (See Note 7 - "Long-Term Debt" below).
2. During the fiscal year ended December 31, 2000, the Company purchased a second commercial property for $178,310. (See Note 5 - "Loan Payable" below)

Consulting Agreement

As of April 24, 2000, the Company entered into a Consulting Agreement with its former President and a current member of its Board of Directors, Mr. W. Scott Lawler, pursuant to which Mr. Lawler agreed to relocate to Calgary, Alberta, Canada, to work at the Company's facilities in Calgary and devote more substantial time to the operations of the Company. The term of the Consulting Agreement is two (2) years, with an option on Mr. Lawler's part to extend for one (1) additional year. Mr. Lawler's consulting agreement calls for an annual salary of $75,000.00, with automatic salary increases of ten

Use of Estimates in the preparation of the financial statements

The preparation of the Company's financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes. Actual results could differ from those estimates.

Basis of Consolidation

The consolidated financial statements include the Company and its wholly owned subsidiary, Capital Reserve Canada Limited. All significant inter-company accounts and transactions have been eliminated.

Depreciation

Depreciation has been provided in amounts sufficient to relate the costs of depreciable assets to operations over their estimated useful lives principally on the straight-line method from two to five years for office equipment and computers and over 25 years for buildings.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments with an original maturity of three months or less to be cash equivalents.

Earnings (Loss) Per Share

Earnings (loss) per share of common stock is computed based on 6,864,235 and 4,105,390 weighted average number of common shares outstanding during the nine (9) month periods ended September 30, 2001, and 2000, respectively. Fully diluted earnings per share are not presented because they are anti-dilutive.

Risks and Uncertainties

The Company is subject to substantial risks and uncertainties inherent in the operation of oil and gas properties and real estate investments.

Note 2-Loans Receivable

Loans Receivable of $181,441 represent monies advanced to various unrelated corporations. These amounts bear interest calculated on the daily outstanding principal at 2% above prime rate and have no specific repayment terms.

Note 3- Investments

During the fiscal year 2000, the Company agreed with Texas T Resources Inc. ("Texas T") (a public reporting Alberta corporation) to fund a portion of the acquisition of a heavy oil upgrading technology by Texas T's majority owned subsidiary, Texas T Petroleum Ltd., (a private Colorado company). Texas T Petroleum Ltd. would acquire a 50% interest in Carbon Resources Limited, a Cyprus company, which holds the rights to the heavy oil upgrading technology known as "CPJ". On August 1, 2000, in consideration of cash proceeds advanced to Texas T for the development of the upgrading technology, the Company entered into a private placement agreement with Texas T for the purchase of 2,000,000 units at $0.0677 per unit, each unit comprised of one share and one share purchase warrant entitling the Company to purchase one additional share at $0.0880 for a period of two years from the date of issue.

Subsequently in the fiscal year 2000, the Company also completed a private placement with Texas T's majority owned subsidiary Texas T Petroleum Ltd., and acquired 2,000,000 units of Texas T Petroleum Ltd. at $0.50 per unit, each unit comprised of one share and one share purchase warrant entitling the Company to purchase one additional share at $1.00 per share for a period of two years from the date of issue. On March 6, 2001, Texas T Petroleum Ltd. completed a reverse split of its share capital at the rate of 10:1, which resulted in the Company's shareholdings in Texas T Petroleum Ltd. being reduced from 2,000,000 units to 200,000 units. The Company's percentage ownership of Texas T Petroleum Ltd. remained constant following the reverse split and totals 9% of the total issued and outstanding shares of Texas T Petroleum Ltd. On July 3, 2001, the Company acquired a further 106,101 common shares in Texas T Petroleum Ltd. by way of a Stock Exchange Agreement with an unrelated third party where under the Company exchanged 652,252 units of Texas T for 106,101 common shares Texas T Petroleum Ltd. As at the date of this report, the Company owns 306,101 common shares of Texas T Petroleum Ltd, and a warrant to acquire an additional 200,000 common shares, which is recorded at a cost of $1,079,737 as at September 30,2001. The Company also owns 1,347,748 units of Texas T which has been recorded at a cost of $85,434 as at September 30,2001.

Note 4- Fixed Assets

|                               | Oil & Gas Leases | Land & Buildings, Calgary, Alberta |                      
|------------------------------ | ---------------- | ---------------------------------- | ---------------------
|                               | Chestermere      | Central Montana                    | 335 - 25 Street. S.E.
|Oil & Gas Leases               | 706,771          | 80,762                             | -                    
|Land                           | -                | -                                  | 511,660              
|Buildings                      | -                | -                                  | 1,064,364            
|Office equipment and computers | -                | -                                  | -                    
|                               | 706,771          | 80,762                             | 1,576,024            
|D, D & A                       | 72,587           | -                                  | 45,897               
|                               |                  |                                    |                      
|Net Book Value                 | 634,184          | 80,762                             | 1,530,127            

Note 5- Loan Payable

Loan Payableof $197,709 is a mortgage for one (1) year repayable on April 11, 2002 bearing interest at the rate of 10% per annum. The mortgage is secured by the commercial property situated at 1528 and 1530 - 9th Avenue S.E., Calgary, Alberta, Canada. The purchase price for this property was $178,310. Proceeds from the mortgage were used to extensively renovate the premises in order to allow for occupancy by commercial tenants.

Note 6- Advances Payable

Advances Payable of $249,936 are advances from various unrelated parties that bear interest at prime rate plus 2% and have no stated terms of repayment.

Note 7- Long-Term Debt

The Company's subsidiary, Capital Canada obtained a $183,831 revolving bank term loan payable on demand with the Alberta Treasury Branches, which amount has been fully drawn upon and is included in the long-term debt reflected on the consolidated balance sheets of the Company. The loan bears interest at the Bank of Canada's prime rate (6.25% as of September 30, 2001) plus 1%, payable on the last day of each month. During the quarter, Capital Canada entered into an further agreement with Alberta Treasury Branches to repay the loan at the rate of $6,339 per month commencing September 30,2001. As collateral security, Capital Canada has pledged a $3,331,000 floating charge debenture over all of its assets. The total assets of Capital Canada at September 30, 2001 amounted to $220,772.

During the fiscal year ended December 31, 2000, the Company purchased a commercial property for a total purchase price of $1,519,000. The Company executed mortgage documents with Standard Life to provide $1,066,080 toward the purchase price. The mortgage has a five-year term, amortized over 15 years, at an interest rate of 8.60%. On September 1, 2005, the mortgage can either be repaid or renewed with the interest rate converted to the then prevailing rate. The Company paid the remainder of the purchase price in cash. Monthly payments of principal and interest are $10,465. As at September 30, 2001, the mortgage balance was $979,106.

In connection with the purchase of residential property described in Note 1 above, the Company assumed a variable interest rate mortgage from Alberta Treasury Branches in the amount of $384,554 amortized over 25 years, due and payable on May 1, 2005. On May 1, 2005, the mortgage can either be repaid or renewed with the interest rate converted to the then prevailing rate. As at September 30, 2001 the mortgage balance was $353,685.

Note 8- Related Party Transactions

See Note 1 - "Residential Property", and "Consulting Agreement" for a discussion of transactions between the Company and Mr. W. Scott Lawler, its former President and a current director.

A company controlled by the President of Capital Canada has incurred consulting fees of $7,500 for the third quarter of the fiscal year 2001 all of which remains outstanding.

Note 9 - Changes in Common Stock

Issuance of Common Stock Options

During the three months ended September 30, 2001, the Company granted non-qualified stock options to directors, employees and consultants for 650,000 shares of Class A common stock under a stock option and award plan for 1,000,000 shares approved by the shareholders in March 2001. As permitted by FASB Statement No. 123, Accounting for Stock-Based Compensation, the Company has elected to follow Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (APB 25) and related interpretations in accounting for its options granted to employees. Accordingly, no expense was recorded for the director or employee stock options. For the non-employee stock options, Class A common stock and consulting expense was increased by $57,045

Note 10- Recent Accounting Pronouncements

In December 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial Statements." SAB 101 summarized certain of the SEC's views regarding the application of generally accepted accounting principles to revenue recognition in financial statements. In June 2000, the SEC amended SAB 101 to acquire companies with fiscal years beginning after December 15, 1999 to implement the provisions of SAB 101 no later than the fourth fiscal quarter. The Company adopted the provision of SAB 101 in fiscal quarter ending December 31, 2000. The adoption does not have a material effect on the Company's financial statements.

Note 11 - Commitments and Contingencies

The Corporation has issued 500,000 shares of its Common Stock to the inventor of the CPJ technology, Dr. Pierre Jorgensen, and is required under the agreement to issue additional shares in the event that the inventor does not realize a minimum amount of proceeds from the sale of such shares. The Corporation entered into this agreement at the request of the joint owner of the CPJ technology, Texas T Petroleum Ltd. Texas T Petroleum Ltd. repaid Capital Reserve for the 500,000 shares and has agreed to repay Capital Reserve for any additional shares issued to Dr. Jorgensen. Texas T Petroleum Ltd. may elect to repay Capital Reserve either in the form of cash or units in Texas T Petroleum Ltd. at a deemed price of $0.25 per unit, with each unit comprised of one share of common stock and a warrant to purchase an additional share of common stock for $0.50 per share. It is impossible at this time to predict the number of shares that Capital Reserve may be required to issue to Dr. Jorgensen. However, based on the current market price of Capital Reserve's stock, the number of shares that may need to be issued could exceed 1 million.

Note 12 - Other

(a)  During the quarter the Company entered into an agreement with its President Ms. Jacqueline Danforth, whereby Ms. Danforth will be paid a monthly fee of $6,875, commencing October 1, 2001. In addition Ms. Danforth was granted a total of 200,000 stock options effective September 10, 2001 for exercise at $1.00 per share for a period of five years from the date of grant.

(b)	An expenditure of approximately $31,545 was incurred in the third quarter of 2001 for renovations on the commercial building at 1528 and 1530 9th Avenue S.E., Calgary, Alberta, and an additional $15,000 for renovations to the building is expected to be incurred during the fourth quarter of 2001. Funds expended on the renovations to the building have been provided by way of a mortgage discussed in more detail in Note 5 - Notes Payable above.

(c)  On November 7, 2001 the Company entered into a Share Exchange Agreement with the Food and Culinary Technology Group Inc. ("FACT"), a Nevada corporation, whereby all of the issued and outstanding shares of FACT will be exchanged for 2,000,000 shares of the Company's Class C common stock. The Share Exchange Agreement is subject to receiving approval from a majority of the shareholders of the Company which will be sought at a Special Meeting of shareholders on November 19, 2001. If the transaction is approved by the shareholders, the Company anticipates that the transaction will be completed on November 20, 2001. Thereafter FACT will be operated as a wholly owned subsidiary of the Company.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

GENERAL

During the nine-month period ended September 30, 2001, Capital Reserve's operations were limited to passive investments in oil and gas leases, two commercial real estate buildings, an equity interest in a company that has a fifty (50%) percent interest in a heavy oil upgrading technology and an investment in a Canadian reporting company traded on the Canadian Venture Exchange ("CDNX"). Each of these investments was acquired during the fiscal year ended December 31, 2000. During the nine months ended September 30, 2001 the Company has increased its investment in the company holding an interest in the heavy oil upgrading technology with a purchase of an additional five (5%) percent, and has added value to its investment in one of the commercial properties through extensive facility renovations. Through the fiscal years ended December 31, 1998 and 1999, management disposed of most of Capital Reserve's assets and applied the proceeds from the sale of those assets to decreasing Capital Reserve's outstanding liabilities. Capital Reserve conducted a number of financings during fiscal years 1999 and 2000. Capital from equity issues or borrowings is required to fund future operations. Therefore, the unaudited financial statements for the nine month periods ended September 30, 2001 and 2000; are not necessarily indicative of Capital Reserve's future operations. As Capital Reserve Corporation is a U.S. corporation, all dollar amounts used herein refer to U.S. dollars unless otherwise indicated.

PLAN OF OPERATION

Capital Reserve currently has sufficient cash and liquid assets to satisfy its cash requirements for the next four months based on its present operations. Capital Reserve has entered into a Share Exchange Agreement with Food and Culinary Technology Group Inc., a Nevada corporation ("FACT"), whereby Capital Reserve will acquire all of the issued and outstanding shares of FACT in exchange for 2 million shares of Capital Reserve's Class C common stock. This acquisition is subject to approval of the shareholders of Capital Reserve at a Special Shareholders Meeting to be held on November 19, 2001. If this acquisition is approved by the shareholders, it is anticipated that the acquisition will be concluded the following day, November 20th and FACT will be operated as a subsidiary of Capital Reserve. One of Capital Reserve's obligations as a result of the acquisition will be providing FACT with funding of $500,000 by January 2, 2002 and an additional $2,500,000 of funding 120 days later. If this funding is achieved, Capital Reserve anticipates such funding will satisfy the cash requirements of Capital Reserve and FACT for the next 12 months.

FACT has acquired the exclusive rights to various functional food formulas and products that it believes will fulfill an unsatisfied need in the food industry. "Functional foods" can be defined as any modified food or ingredient that provides health benefits beyond the traditional nutrients it contains. FACT's functional food products contain numerous health benefits, such as no sugar, no cholesterol, low carbohydrates and low sodium. FACT believes that its functional food products will beneficial to diabetics, dieters and others that are attempting to maintain a healthy lifestyle.

Capital Reserve has commenced a private placement of $750,000 of its securities to satisfy the initial funding obligation. The offering is for units comprised of one share of Capital Reserve Class A common stock and a warrant to purchase an additional share of Class A common stock for $1.50.

The funding described above will be utilized by FACT for the test launch of its first product, a functional food bread, in 500-600 retail stores located in the Northeast portion of the U.S. and California. If the test launch is successful, the funding will also be used for the national roll-out of the product.

The funding will also cover continued development of products by FACT's product development team. The focus of the product development team for the next twelve months will be to finalize the formulas for four to five new functional food products. FACT has budgeted $231,500 to be spent on product development during the next twelve months.

FACT will also spend approximately $88,000 of the funding to acquire satisfactory product development kitchen equipment, which will allow it to conduct its product development work. Capital Reserve does not anticipate any further purchase of plant or significant equipment nor the sale of either during the next twelve months.

During the next twelve months, Capital Reserve does not expect to increase its number of employees. FACT expects to increase its number of employees from one to seven as it launches its functional food products.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Not Applicable.

ITEM 2. CHANGES IN SECURITIES

Not Applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not Applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not Applicable.

ITEM 5. OTHER INFORMATION

On August 8, 2001 Mr. W. Scott Lawler resigned as the Company's President and Ms. Sharon Patmore resigned as Treasurer. On the same date the Board of Directors appointed Ms. Jacqueline Danforth as President and Treasurer. Ms. Danforth was also elected to the Board of Directors. Ms. Danforth has spent the past several years in the employ of publicly traded companies, providing management, administrative and accounting services. From December 1, 1997 to June 15, 2001, Ms. Danforth was the Secretary, Treasurer and a member of the Board of Directors of Synergy Technologies Corporation. During her tenure at Synergy Technologies, Ms. Danforth was a member of Synergy's Audit Committee; a director of Carbon Resources Limited, a subsidiary of Synergy; a director of SynGen Technologies Limited, a wholly owned subsidiary of Synergy; and a director of Lanisco Holdings Limited, a wholly owned subsidiary of Carbon Resources Limited. Ms. Danforth has attended various courses and seminars offered by CAPL and the University of Calgary to familiarize herself with the oil and gas industry. Ms. Danforth is currently completing her studies to become a Certified General Accountant.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

1. Exhibits and Index of Exhibits - see Exhibit Index below.
2. Reports on Form 8-K - none.

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CAPITAL RESERVE CORPORATION

Date: November 14, 2001

By:/s/ Jacqueline R. Danforth
Name: Jacqueline R. Danforth
Title: President, Treasurer, Senior Financial Officer

By:/s/ Roy PhiliposeName: Roy Philipose
Title: Controller, Chief Accounting Officer

EXHIBIT INDEX

|REGULATION S-B NUMBER EXHIBIT | EXHIBIT                                                                                                           | REFERENCE                                                                                                                                             
|----------------------------- | ----------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1                           | Articles of Incorporation, as amended                                                                             | Incorporated by reference to the Exhibits previously filed with the Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1990
|3.2                           | Amended Bylaws                                                                                                    | Incorporated by reference to the Exhibits previously filed with the Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1994
|10.1                          | Management Agreement with Mr. Loder                                                                               | Incorporated by reference to the Exhibits previously filed with the Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1998
|10.2                          | Lease Agreement dated January 15, 2000 between Capital Reserve Canada Limited and 319835 Alberta Ltd.             | Incorporated by reference to Exhibit 10.14 to the Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1999                  
|10.3                          | Purchase and Sale Agreement dated March 1, 2000 by and between Capital Reserve and Stone Canyon Resources Limited | Incorporated by reference to the Exhibits previously filed with the Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1999
|10.4                          | Stock Purchase Agreement dated October 6, 1998 with Ralph and Patricia Newton                                     | Incorporated by reference to Exhibit 99.1 filed with Capital Reserve Corporation's Current Report on Form 8-K dated February 3, 1999                  
|10.5                          | Capital Reserve Corporation Year 2000 Employee Stock Option and Stock Award Plan                                  | Incorporated by reference to Exhibit 99.1 filed with Capital Reserve Corporation's Registration Statement on Form S-8 dated filed on March 23, 2000   



|10.6  | Lease Agreement dated August 1, 2000 between 319835 Alberta Ltd. and Toshiba of Canada Limited                   | Incorporated by reference to the Exhibits filed with Capital Reserve Corporation's Form 10QSB for March 31, 2001
|----- | ---------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------
|10.7  | Lease Agreement dated September 1, 2000 between Capital Reserve Corporation and Synergy Technologies Corporation | Incorporated by reference to the Exhibits filed with Capital Reserve Corporation's Form 10QSB for March 31, 2001
|10.8  | Lease Agreement dated September 1, 2000 between Capital Reserve Corporation and Capital Reserve Canada Limited   | Incorporated by reference to the Exhibits filed with Capital Reserve Corporation's Form 10QSB for March 31, 2001
|10.9  | Agreement of Purchase dated August 31, 2000 between Capital Reserve Corporation and 319835 Alberta Ltd.          | Incorporated by reference to the Exhibits filed with Capital Reserve Corporation's Form 10QSB for March 31, 2001
|10.10 | Credit Facility Agreement dated March 7, 2000 between Capital Reserve Corporation and Alberta Treasury Branches  | Incorporated by reference to the Exhibits filed with Capital Reserve Corporation's Form 10QSB for March 31, 2001
|10.11 | Share Exchange Agreement dated June 26, 1999 between Texas T Petroleum Ltd. and Synergy Technologies Corporation | Incorporated by reference to the Exhibits filed with Capital Reserve Corporation's Form 10QSB for March 31, 2001
|10.12 | Mortgage from Ultimate Resort Destinations Inc. dated April 12, 2001                                             | Incorporated by reference to the Exhibits filed with Capital Reserve Corporation's 10QSB for June 30, 2001.